Nigeria Needs to Generate Liquidity To Ensure Growth and Stability - Dr. Ayo Teriba

Africans should collaborate  on how to raise Liquidity in order to build infrastructure. Said the CEO of Economic Associates on a WebTV morning segment CoronanonomicsWatch.

Speaking on the global development and realities on how it will impact Nigeria, the economic  analyst said that there were two sides to the story,  there is pandemic itself and there is a fallout from the pandemic. 

The pandemic arrived in Nigeria 3 weeks ago but some of the  social, economic and political consequences of the pandemic arrived in Nigeria ahead of the health challenges.  Such early challenges included the decline of the domestic capital market, in addition to the fear and anxiety emerging from the health pandemic itself.

The economist noted that Nigeria didn't shut down rapidly enough after the pandemic announcement on the Asian continent. China was locked down for  three months. Teriba explained that the only way to prevent the disease from spreading was through nation-wide self-isolation.

Speaking on policy responses and monetary policy. He said, the pandemic was characterised by a  widen divergence between the economical financial task.

The world economy has been slowing, trade has been declining largely because of a supply glut.

He equally pointed out that a liquidity glut would  impact the global economic system by liquidity-challenged nations looking for more capital inflows in a post lockdown environment.

 On the economy's growth for  Q1 and Q2  as it concerns sub Saharan, Africa and Nigeria and how it will impact businesses and the households, the economist explained that for Q1,  Nigeria ahead of the pandemic  had a slow growth outlook as a result of declining oil prices, combined with supply chain disruptions and declining demand this would lead to a slow Q1 GDP growth rate in 2020.

Speaking further on what would happen in Q2 2020 the outcome, according to Teriba was largely uncertain if conditions permit the lockdown in Nigeria to end in the month of April. Production would take some time to ramp up and input deliveries would require at least a month, thereby locking in only one month of stable production activity in Q2. 

He was, however, optimistic that if  things pick up in the second half of the year there may be a resultant growth that may be better than last year's 2.27%.

On the president of International Monetary Fund [IMF] talking about recession and what might likely happens to Nigeria's economy Dr.Teriba  said , there was a need for Nigeria's economic management to align with global realities. He noted that it was difficult to raise any revenue in the lockdown and it was going to be difficult to do so immediately after the lock down.

Nigeria  needs an opportunity to get in massive capital inflows like other African counterparts.

He spoke further on tight monetary policy and high domestic interest rates despite the impact of the COVID-19 impact on the economy. He observed that Nigeria had limited monetary policy leeway as a result of low external reserves and low international oil price, he therefore, felt that more of the policy orientation should tilt towards fiscal policy. Teriba advised that the main problem  to solve now is to raise external liquidity to where we can regain monetary  policy control.

He said, Nigeria's external liquidity was very low and that the economic managers needed to find ways to bolster liquidity in the face of persistent global conditions. Teriba said that when asset values were high  Nigeria failed to attract capital assets in good time. Asset values are low even in terms of oil sector investments.

The economist was of the opinion that Nigeria should begin to talk about its nascent assets and how they could be turned into liquid cash flows. He noted that Nigeria had one of the biggest continental hydro assets. The military camps and  rail stations abandoned in Nigeria can attract foreign investors. He said Nigeria is asset-rich.

The expert cited Indian as a country in 2018 that got $64billion in foreign direct investment in one year in form of  equity and not debt. In his opinion Nigeria should use equity due to the large asset base the country has to offer to strategic investors. 

He cited the African Continental Free Trade Agreement (AfCFTA) ,  noting that trade is a secondary issue, suggesting that for a nation to trade, it must produce and to produce it needs infrastructure. Africa's infrastructure deficiency means that it cannot produce thereby resulting in net trade losses.

For nations to add value to what they produce they need infrastructure, for nations to deploy infrastructure they need liquidity. African countries, therefore, need to cooperate in how to raise liquidity to deploy infrastructure which will make trade happen, said Teriba.

The CEO of Economic Associates insisted that the country and continent needed to dimension its economic marginalisation. If economies are contracting they cannot talk about trade because of their infrastructural deficit.

Teriba says that Nigeria  should be worried about its liquidity for infrastructure and once this is sorted out, trade and growth will happen naturally.